The latest data from the HL Savings & Resilience Barometer, January 2023, has highlighted the significant impact of intergenerational wealth on financial resilience.
The study shows that the educational and employment status of parents, along with their homeownership, has a significant influence on the financial stability of their children.
According to the barometer, 48% of people whose fathers had a degree had enough cash left over at the end of the month to be financially resilient, compared to 29% of those whose fathers left school before the age of 15.
The figures were similar for mothers, at 47% and 28% respectively. Furthermore, 47% of those whose fathers were employed during their upbringing are on track for a moderate retirement income, compared to just 24% of those whose fathers did not work.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “We owe so much more to the Bank of Mum and Dad than we’re ever likely to admit to them. It’s most obvious when it comes to getting onto the property ladder, but they can impact every corner of your finances – even when they don’t hand over a penny.”
Highlighting the slow pace of social mobility, Coles pointed out that OECD figures show it takes an average of five generations for those born in low-income families to earn the average income. The Barometer’s findings are consistent with this, showing a correlation between parental wealth and factors such as employment and homeownership.
Coles emphasised that wealthier parents are more likely to be able to pass money on, contributing to their children’s financial stability through means such as helping them onto the property ladder, setting up a Junior ISA, or contributing to their pension. Furthermore, she noted that the impact goes beyond money, with financially stable parents offering a safety net that allows their children to take more career risks.
However, the Barometer also indicated a downside to parental wealth, showing that future debt affordability falls among those with wealthier backgrounds. This is due to wealthier individuals feeling more confident in their ability to repay debt, leading to them borrowing more at variable interest rates.
